Gold May Rise to $5,000 on Inflation, Schroder Says (Update1) By
Bei Hu - Last Updated: June 19, 2008 04:44 EDT
June 19 (Bloomberg) -- Gold prices may rise to $5,000 an
ounce as investors seek to protect themselves against accelerating
inflation, said Schroder Investment Management Ltd., which
oversees $277 billion of assets globally.
``You could easily see for the next several years that prices
rise not to $1,000 an ounce, but prices rise to $5,000 an
ounce or beyond as inflation psychology becomes more and more
embedded and people become desperate to have a source of value,''
said Christopher Wyke, London-based emerging market debt and
commodities product manager at Schroder, which oversees about
$10 billion of commodity assets.
Investors are turning to gold for protection as two-thirds
of the world's population cope with inflation rates that are
climbing to more than 10 percent, Wyke said. Cash and inflation-
linked bonds are poor substitutes as low interest rates, coupled
with surging inflation, erode the real value of assets, he
Bullion for immediate delivery was down 0.2 percent at $892.48
an ounce at 9:57 a.m. in Singapore, after gaining 3 percent
in the past four days. Wyke didn't give a time frame for his
Demand for gold will also rise as central banks become net
buyers for the first time in 20 years, driven by developing
countries, he added. Last year, world production of gold sank
to the lowest since 1937 as reserves are depleted and few
new sources of gold have been found.
Wyke was speaking at a press conference in Hong Kong today
to market the Schroder Alternative Solutions Gold and Metals
Fund, the first commodity fund authorized for sale to individuals
in the city that invests primarily in derivatives, including
futures, warrants, swaps and options. Robert Howell and Paula
Bujia will manage the fund.
Gold may account for about 40 percent of the fund's assets,
based on a ``model'' fund used to simulate returns, said Wyke.
The fund would also buy securities linked to metals including
aluminum, copper, iron ore, zinc and uranium.
The limited amount of gold available, relative to the size
of the global capital markets, means a small shift in investments
may lead to significant price changes for the metal, Wyke
said. Total gold above ground is worth about $4.8 trillion,
compared with global stock and bond markets worth $135.2 trillion.
UBS AG, Hang Seng Bank Ltd., KBC Groep NV and Lehman Brothers
Holdings Inc. are among firms that manage commodity funds
in the city, according to the Hong Kong Securities and Futures
Commission. Bank of East Asia Ltd. in February started a fund
that buys shares of companies that produce materials and energy.